CSR and Business Ethics - Need for An Integrated Approach


Dr. Ravi Shekhar Vishal
Dr. Shardul Chaubey
Senior Lecturer
School of Management Sciences
Mohansarai-Mughalsarai Bypass, Varanasi

Abstract- As recently as a decade ago, many companies viewed business ethics only in terms of administrative compliance with legal standards and adherence to internal rules and regulations. Today the situation is different. Attention to business ethics is on the rise across the world and many companies realize that in order to succeed, they must earn the respect and confidence of their customers.

Like never before, corporations are being asked, encouraged and prodded to improve their business practices to emphasize legal and ethical behaviour. Companies, professional firms and individuals alike are being held increasingly accountable for their actions, as demand grows for higher standards of corporate social responsibility.

The expansion of international markets has resulted in invasion of ethical difficulties within the workplace. Today, it is important for organizations to develop and operate both Business Ethics (BE) and Corporate Social Responsibility (CSR) within the agenda of the companies. However, in the wake of global economy, the issue of corporate ethics requires an integrated approach. The ethical approaches vary from one organization to another.

This paper emphasises on the inclusion of good corporate governance, environmental accountability and corporate social responsibility in the business philosophy of the corporate houses and to develop an integrated approach which can lead to the standardised norms of social responsibility for the entire business world around the globe.

Key Words- Triple Bottom Line Reporting, Environmental Accountability, Corporate Social Responsibility, Corporate Governance, Organisational Transformation, Sustainability Reporting.


It is the perception about the nature of business and its relationship with society that defines the 'Social Responsibility of Business'. It determines what the responsibility of business towards society is and hence, the setting up standards of such responsibility is based on philosophy of business since it is concerned with 'the fundamental principles that underlie the formation and operation of a business enterprise'.

Traditionally, business has been seen as a property institution rather than a social institution. In its conventional form, the primary motive of business was to earn profits. It was believed that business should earn profits at any cost. This implies that the domain of business as an entity was distinct and independent from that of the rest of society. Society expected business to produce goods and services as per the need of its members. Business as well as society expected the State or Government to take care of other social and environmental concerns. Further, it was assumed that the managers would automatically meet the interest of shareholders.

Paradigm Shift

Over a period of the two decades since Drucker made his remarks about business ethics, there has been tremendous change in the paradigm, which is the result of two shifts. The first shift relates to the philosophy of business. The new perspective has broken down this compartmentalization of business and society and by now it has been realized that social and environmental issues can no longer be addressed entirely through a unilateral imposition by the State through a legal framework. In the light of this new development, the business had to gear itself to rethink to develop new theories and practices of management to align itself with this breakdown.

Besides this, the phenomena of a rapid decline in the role of the State and withdrawal of the State from the social space have created a vacuum. As the needs of the society and the imbalances in the society have not changed, and therefore business has to emerge as the filler. The roles, relationships and realms of the three entities – the government, the business and the society have changed. The first implication is that this imposes a corporate responsibility of businesses towards society. This is indicative of a paradigm shift in the philosophy of business.

Corporate Responsibility of Businesses towards Society

By the existing philosophy of business a business only had a responsibility towards its shareholder by earning profit for them. This was the understood as the role of business. Business was 'possible' because society desired this role of it. Here, we wish to make a strong axiomatic enunciation, namely, if the philosophy of business is about 'how business is possible?' and about 'formation and operation of a business enterprise', then it automatically includes the premise of 'how business may not be possible' and how instead of 'formation and operation of a business enterprise' how a business may cease 'to operate'. The basis of the philosophy of business should naturally include its obverse. Hence, the philosophic basis of business does not arise out of 'business strategy' and is not buttressed by how CSR enhances profits. It lies in not only explaining 'how business is possible?' but in explaining "How businesses cease to operate?" or "How businesses fail?" And, how this is not merely a question of finance or profit, for some of the most profitable concerns and giants at that have failed.

Hence, earlier businesses could be formed and could operate successfully without including in their conduct anything that is a concern of society, beyond what is valued, created and delivered through the market. It was assumed that any responsibility that business had towards society is duly discharged through the market mechanism. Services, goods, raw materials and other resources that are drawn by business from society are adequately recompensed by the price established by the price mechanism. The prevailing philosophy was content with such a notion.

Now, the second implication of the paradigm shift is that businesses can no longer afford to do so. A business has to be responsible towards society. It has to be accountable to the environment. And, it has to be good to its shareholders. Without having such ethical conduct in business it may cease to exist. The entire three dimensions arise out of business ethics. Particularly, out of the newfound role of business and directly relate to Business Ethics. Thus, there is a need to incorporate in their 'Business Philosophy' all the three dimensions. There is a need to treat corporate responsibility as a package of three dimensions (a) good governance (b) corporate social responsibility ("CSR") (c) accountability. This implies that all three of them co-exist and can no longer be put in three water tight compartments. Business has been forced to accept corporate responsibility in its entirety, which means amalgamation of all the three dimensions taken together.

Corporate Responsibility

Corporate Responsibility, it has been seen arises from Business Ethics and has three dimensions, that is:

(a) Good Corporate Governance
(b) Corporate Social Responsibility
(c) Environmental Accountability
(d) Corporate Sustainability and Sustainability Reporting

This is how business ethics becomes an all pervading influence in the governance of business. The top management is not only responsible to envision such a change but to translate this vision into practices and also to make sure that they adopt a balanced approach towards three dimensions. It should be evidenced from the conduct of business as it is not easy for them to get away from this by indulging into only in lip service.

(a) Good Corporate Governance:

In A Board Culture of Corporate Governance business author Gabrielle O'Donovan defines corporate governance as 'an internal system encompassing policies, processes and people, which serves the needs of shareholders and other stakeholders, by directing and controlling management activities with good business savvy, objectivity and integrity. Sound corporate governance is reliant on external marketplace commitment and legislation, plus a healthy board culture which safeguards policies and processes.

O'Donovan goes on to say that 'the perceived quality of a company's corporate governance can influence its share price as well as the cost of raising capital. Quality is determined by the financial markets, legislation and other external market forces plus how policies and processes are implemented and how people are led. External forces are, to a large extent, outside the circle of control of any board. The internal environment is quite a different matter, and offers companies the opportunity to differentiate from competitors through their board culture. To date, too much of corporate governance debate has centered on legislative policy, to deter fraudulent activities and transparency policy which misleads executives to treat the symptoms and not the cause.'[2]

It is a system of structuring, operating and controlling a company with a view to achieve long term strategic goals to satisfy shareholders, creditors, employees, customers and suppliers, and complying with the legal and regulatory requirements, apart from meeting environmental and local community needs.

Report of SEBI committee (India) on Corporate Governance defines corporate governance as the acceptance by management of the inalienable rights of shareholders as the true owners of the corporation and of their own role as trustees on behalf of the shareholders. It is about commitment to values, about ethical business conduct and about making a distinction between personal & corporate funds in the management of a company." The definition is drawn from the Gandhi an principle of trusteeship and the Directive Principles of the Indian Constitution. Corporate Governance is viewed as ethics and a moral duty.

Key elements of good corporate governance principles include honesty, trust and integrity, openness, performance orientation, responsibility and accountability, mutual respect, and commitment to the organization.

Of importance is how directors and management develop a model of governance that aligns the values of the corporate participants and then evaluate this model periodically for its effectiveness. In particular, senior executives should conduct themselves honestly and ethically, especially concerning actual or apparent conflicts of interest, and disclosure in financial reports.

Commonly accepted principles of corporate governance include:

  • Rights and equitable treatment of shareholders: Organizations should respect the rights of shareholders and help shareholders to exercise those rights. They can help shareholders exercise their rights by effectively communicating information that is understandable and accessible and encouraging shareholders to participate in general meetings.
  • Interests of other stakeholders: Organizations should recognize that they have legal and other obligations to all legitimate stakeholders.
  • Role and responsibilities of the board: The board needs a range of skills and understanding to be able to deal with various business issues and have the ability to review and challenge management performance. It needs to be of sufficient size and have an appropriate level of commitment to fulfill its responsibilities and duties. There are issues about the appropriate mix of executive and non-executive directors. The key roles of chairperson and CEO should not be held by the same person.
  • Integrity and ethical behavior: Ethical and responsible decision making is not only important for public relations, but it is also a necessary element in risk management and avoiding lawsuits. Organizations should develop a code of conduct for their directors and executives that promotes ethical and responsible decision making. It is important to understand, though, that reliance by a company on the integrity and ethics of individuals is bound to eventual failure. Because of this, many organizations establish Compliance and Ethics Programs to minimize the risk that the firm steps outside of ethical and legal boundaries.
  • Disclosure and transparency: Organizations should clarify and make publicly known the roles and responsibilities of board and management to provide shareholders with a level of accountability. They should also implement procedures to independently verify and safeguard the integrity of the company's financial reporting. Disclosure of material matters concerning the organization should be timely and balanced to ensure that all investors have access to clear, factual information.

Issues involving corporate governance principles include:

  • internal controls and the independence of the entity's auditors
  • oversight and management of risk
  • oversight of the preparation of the entity's financial statements
  • review of the compensation arrangements for the chief executive officer and other senior executives
  • the resources made available to directors in carrying out their duties
  • the way in which individuals are nominated for positions on the board
  • dividend  policy

Nevertheless "corporate governance," despite some feeble attempts from various quarters, remains an ambiguous and often misunderstood phrase. For quite some time it was confined only to corporate management. That is not so. It is something much broader, for it must include a fair, efficient and transparent administration and strive to meet certain well defined, written objectives. Corporate governance must go well beyond law. The quantity, quality and frequency of financial and managerial disclosure, the degree and extent to which the board of Director (BOD) exercise their trustee responsibilities (largely an ethical commitment), and the commitment to run a transparent organization- these should be constantly evolving due to interplay of many factors and the roles played by the more progressive/responsible elements within the corporate sector. In India, a strident demand for evolving a code of good practices by the corporation, written by each corporation management, is emerging.

Corporate reforms and new regulatory requirements have been the driving force behind increased demands on executive leaders and board members to improve their corporate governance practices. Increasingly, leading-edge research, expert analysis, and the opinions of business executives indicate that when companies apply an integrated approach to governance, risk, and compliance (GRC) activities, they enhance their competitiveness and bottom line success. Businesses have traditionally viewed GRC functions as separate, costly, and at times onerous endeavors that were nonetheless necessary for meeting regulatory requirements and reporting standards. But leading companies understand the rising imperative behind the public demand for better corporate governance and are devising creative strategies for leveraging their GRC systems to drive value as well as increase their compliance performance. Among the benefits are superior reputations, more streamlined compliance activities, lower costs of capital and insurance, and fewer incidents of noncompliance. A new emphasis on governance functions then, whether spurred by political and public pressure or motivated by altruistic aims, can both protect and propel companies. When considering best practices in the area of corporate governance, it is important to remember that legal mandates and regulatory requirements are just one part of the story. Companies that apply best practices in governance are never satisfied with mere technical compliance with laws. Instead, they identify and plan for the governance-related initiatives that they will need to adopt in order to be effective, flexible, and compliant within an ever-changing legal and regulatory landscape worldwide.

Practices in corporate governance begin with a commitment by the board of directors and senior managers to elevate the discipline to a high strategic priority. To improve corporate governance and make it a source of value, leading companies integrate their governance, risk management, and compliance activities so they are more efficient, consistent, and legally sound. To create this integrated compliance model, the companies are identifying and prioritizing  compliance-related risks that need to be managed and controlled, launching change management initiatives to support the necessary structural and job changes, and enabling and measuring this transformation through the information technology (IT) infrastructure. risk, and compliance processes. The examples of the failures of the Corporate Governance are as under.

To conclude, the corporations are formed on the basis of division of ownership and control, in which the investor or owner relies on the manager i.e. CEO to manage the business on his behalf which implies that principal agent relationship exists between investor and manager, which causes the room for asymmetric information i.e. there is always a gap between the information possessed by the manager vis-à-vis the investors. This situation calls for a good governance, corporate governance means transparency. The shareholders must have full and true information. There should be transparency in processes, so that the agent (manager) cannot mismanage or take the advantage of the asymmetric information. The objective of good governance is to have such system of controlling and managing so that the interest of owner may be protected.

For this to be successful, whatever hurdles are there in the processes are to be removed. The processes are necessary to prohibit the manager to push their own agenda or self interest, i.e. the manager as working in the capacity of agent, might have their own individual goals to pursue which are not in line with organizational goals. Such processes are to be institutionalized which protect the interest of the owner i.e. profit maximization and wealth maximization. Therefore, ethical structure has the implication for good governance, which means better profits. It is important to make profits within ethical framework. There is a shift in the psychology of investors they are not only curious to know how much profit the Company has booked but also how this profit has been earned, i.e. ethically or unethically. Therefore, business has to be done ethically, the profits are to be taken seriously, if not, it would be interpreted as if the business is not indulging into good governance.

(b) Corporate Social Responsibility ("CSR"):

Second ethical dimension of CSR includes the social practices where the company is discharging its responsibility towards community at large i.e. stakeholders. Stakeholders are the ones who can influence or can be influenced by the actions, decisions, policies, practices and goals of the company.

There is today a growing perception among enterprises that the sustainable business success and shareholder value cannot be achieved solely through maximizing the short term profits, but instead through the market –oriented yet responsible behaviour. Companies do know the fact that they can contribute to sustainable development by managing their operations in such a way as to enhance the economic growth and increase competitiveness whilst ensuring the environmental protection and promoting social responsibility, including consumers interest.

Corporate Social responsibility is an evolving concept that currently does not have a universally accepted definition. It is also referred to as Corporate Citizenship. CSR is understood to be the way firms integrate social, environment and economic concerns into their values, culture, decision making, strategy and operations in the transparent and accountable manner and thereby establish better practices within the firm, create wealth and improve society.

Corporate Social Responsibility can be explained as:
Corporate- means organized business
Social- means everything dealing with the people
Responsibility- means accountability between the two

Corporate Social Responsibility is nothing but what an organization does to positively influence the society in which it exists. It could take the form of community relationship, volunteer assistance programmes, special scholarships, preservation of cultural heritage, and beautification of cities. The philosophy is basically to return to the society what it has taken from it, in the course of its quest for creation of wealth.

"The obligation of businessman to pursue those policies, to make those     decisions, or to follow those lines of action which Are desirable in terms of objectives and values of society"
                                                                                                                                                        Browin H. R.,

Above definition focuses on the fact that business entity is expected to undertake those activities that are essential for betterment of the society. Every aspect of business has a social dimension. Corporate Social Responsibility means open and transparent business practices that are based on ethical values and respect for employees, communities and the environment. It is designed to develop sustainable value to society at large as well as to the shareholder.

CSR is also the way a company achieves a balance while at the same time addressing the shareholder and stakeholder expectations. It is generally accepted at applying to firms where they operate in the domestic and global economy. The way businesses involve/engage the shareholders, employees, customers, suppliers, governments, NGO's, international organizations and other stakeholders is usually the key feature of the concept. While business's compliance with laws and regulations on social, environmental and economic objectives set the official level of CSR performance, it is often understood as involving the private sector commitments and activities that extend beyond this foundation of compliance with laws.

The term CSR refers to the concept of business being accountable for how it manages the impact of its processes and stakeholders and takes responsibility for producing the positive effect on society. CSR has been defined as the continuing commitment by business to behave fairly and responsibly and contribute to economic development while improving the quality of life of the workforce and their families as well as the local community and society at large.

In short CSR is the concept whereby the companies integrate social and environmental concerns in their business concerns in their business operations and in their interactions with the stakeholders on the voluntary basis. The main function of the enterprise is to create value through producing goods and services that society demands thereby generating profits for its owners and shareholders as well as welfare for society, particularly through an ongoing process of job creation. However new social and market pressures are gradually leading to the change in the values and in the horizon of business activity.

Apart from shareholder, it includes employees' consumers, supplies, government competitors, and community at large. Traditionally, so far business was treated purely from the point of view of private personal pecuniary motive. Now, a company has acknowledged its responsibilities to society that goes beyond the production of goods and services at a profit. It involves the idea that the corporate has a broader constituency to serve than that of shareholder alone, in more recent years, the term stakeholder has been widely used to express this broader set of responsibilities. By now, it is accepted that corporations are more than economic institutions and they have a responsibility to help society to solve pressing social problems. CSR is about how companies manage the business processes to produce an overall positive impact on society.

According to Richard Walls, "Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local communities and society at large". CSR is about business giving back to society. The concept of social responsibility is fundamentally an ethical concept as it involves changing notions of human welfare, and emphasizes a concern with the social dimension of business activity that have to do with improving quality of life. The concept provided a way for business to concern itself with these social dimensions and pay some attention to its social impacts. As a result, many of them put a step forward for discharging their responsibility by indulging into philanthropy or by bringing CSR into business strategy.

(c) Environmental Accountability:

Corporate Responsibility has third dimension in form of accountability of business towards environment. As business interacts with its natural environment, it draws its resources from the environment. It also influences the environment by its actions. Therefore, it is also accountable to it for any impact, which it makes. Earlier corporate dumped their wastes with impunity in the environment. With the growing awareness and concern about environmental degradation, depletion of natural resources like water and fossil fuels and the phenomenon of global warming, there is moral and legal pressure on corporate to realize that the earth needs to be preserved, and looked after so that future generation are not adversely affected.

Corporate Responsibility is closely linked with the principles of Sustainable Development, in proposing that the enterprises should be obliged to make decisions based not only on financial or economic factors but also on the social and environmental consequences of their activities. Therefore, corporate responsibility is about how businesses align their values and behaviour with the expectations and needs of different stakeholders. It also describes a company's commitment to be accountable to its environment, i.e. planet, to be responsible to its society at large, i.e. people and to be transparent in his business practices, i.e. good governance which determines the profit for the investors.

In other words Environmental accounting focuses on the cost structure and environmental performance of a company. It principally describes the preparation, presentation, and communication of information related to an organisation's interaction with the natural environment. Although environmental accounting is most commonly undertaken as voluntary self-reporting by companies, third-party reports by government agencies, NGOs and other bodies posit to pressure for environmental accountability.

Accounting for impacts on the environment may occur within a company's financial statements, relating to liabilities, commitments and contingencies for the remediation of contaminated lands or other financial concerns arising from pollution. Such reporting essentially expresses financial issues arising from environmental legislation. More typically, environmental accounting describes the reporting of quantitative and detailed environmental data within the non-financial sections of the annual report or in separate (including online) environmental reports. Such reports may account for pollution emissions, resources used, or wildlife habitat damaged or re-established.

In their reports, large companies commonly place primary emphasis on eco-efficiency, referring to the reduction of resource and energy use and waste production per unit of product or service. A complete picture which accounts for all inputs, outputs and wastes of the organisation, must not necessarily emerge. Whilst companies can often demonstrate great success in eco-efficiency, their ecological footprint, that is an estimate of total environmental impact, may move independently following changes in output.

Legislation for compulsory environmental reporting exists in some form e.g. in Denmark, Netherlands, Australia and Korea. The United Nations has been highly involved in the adoption of environmental accounting practices, most notably in the United Nations Division for Sustainable Development publication Environmental Management Accounting Procedures and Principles (2002).

(d) Corporate Sustainability and Sustainability Reporting:

Sustainable development is a broad concept that balances the need for economic growth with environmental protection and social equity. Corporate Sustainability encompasses strategies and practices that aim to meet the needs of stakeholders today while seeking to protect, support to enhance the human and natural resources that will be needed in future

Corporate Sustainability is a business approach that creates long –term shareholder values by embracing opportunities and managing risks deriving from economic, environmental and social developments. Corporate Sustainability describes business practices built around social and environmental considerations. Corporate Sustainability encompasses strategies and practices that aim to meet the needs of stakeholders today while seeking to protect, support and enhance the human and natural resources that will be needed in the future.

The concept of sustainability reporting is of recent origin. In the recent years with emphasis being placed on the ways in which the companies match their resources to the needs of the marketplace. It has given rise to the concept of corporate performance management and measurement. The new approach is an integrated one seeking to link strategic management, management accounting and reporting. The reporting contemplated here covers the whole information communication process comprising internal and external stakeholders. Sustainability reporting is a part of the new approach.

Benefits of Sustainability Reporting

  • Today's strategic and operational complexities require a continual dialogue with investors, customers, advocates, suppliers, and employees. Reporting is a key ingredient to building, sustaining, and continually refining stakeholder engagement. Reports can help communicate an organisation's economic, environmental, and social opportunities and challenges in a way far superior to simply responding to stakeholder information requests.
  • Companies increasingly emphasise the importance of relationships with external parties, ranging from consumers to investors to community groups, as key to their business success. Transparency and open dialogue about performance, priorities, and future sustainability plans helps to strengthen these partnerships and to build trust.
  • Sustainability reporting is a vehicle for linking typically discrete and insular functions of the corporation—finance, marketing, research and development—in a more strategic manner. Sustainability reporting opens internal conversations where they would not otherwise occur.
  • The process of developing a sustainability report provides a warning of trouble spots—and unanticipated opportunities—in supply chains, in communities, among regulators, and in reputation and brand management. Reporting helps management evaluate potentially damaging developments before they develop into unwelcome surprises.
  • Sustainability reporting helps sharpen management's ability to assess the organisation's contribution to natural, human, and social capital. This assessment enlarges the perspective provided by conventional financial accounts to create a more complete picture of long-term prospects. Reporting helps highlight the societal and ecological contributions of the organisation and the "sustainability value proposition" of its products and services. Such measurement is central to maintaining and strengthening the "licence to operate".
  • Sustainability reporting may reduce volatility and uncertainty in share price for publicly traded enterprises, as well as reducing the cost of capital. Fuller and more regular information disclosure, including much of what analysts seek from managers on an ad hoc basis, can add stability to a company's financial condition by avoiding major swings in investor behaviour caused by untimely or unexpected disclosures.

Integrated Approach

In most recent years, many of the corporate have adopted Triple Bottom Line Reporting, which is an integrated approach to public reporting of environmental, social and economic outcomes against benchmarks. This major step is taken by the Companies to integrate all the three dimensions of business ethics with the business strategies. This line of thinking comes from the top management. A series of internal and external pressures influence the corporate leaders to address ethics such as increasing influence of Non-Government Organizations (NGOs), a pervasive media in search of stories, knock on effect of corporate accounting scandals such as Enron and WorldCom, increasing legislation, increasing growth of socially responsible investments (SRI), changing consumers and employees' expectation and never ending social activists' campaigns. Top management is responsible to integrate ethical consideration with company's decision making and manage on the basis of personal integrity and widely held organizational value. It is their prerogative to translate their vision, mission statements and ideas into practices.

The triple bottom line is made up of "social, economic and environmental" the "people, planet, profit" phrase was coined for Shell by Sustainability, influenced by 20th century urbanist Patrick Geddes's notion of 'folk, work and place'.

"People, planet and profit" succinctly describes the triple bottom lines and the goal of sustainability.

"People" (human capital) pertains to fair and beneficial business practices toward labour and the community and region in which a corporation conducts its business. A TBL company conceives a reciprocal social structure in which the well-being of corporate, labour and other stakeholder interests are interdependent.

A triple bottom line enterprise seeks to benefit many constituencies, not exploit or endanger any group of them. The "upstreaming" of a portion of profit from the marketing of finished goods back to the original producer of raw materials, i.e., a farmer in fair trade agricultural practice, is a not unusual feature. In concrete terms, a TBL business would not use child labour and monitor all contracted companies for child labour exploitation, would pay fair salaries to its workers, would maintain a safe work environment and tolerable working hours, and would not otherwise exploit a community or its labour force. A TBL business also typically seeks to "give back" by contributing to the strength and growth of its community with such things as health care and education. Quantifying this bottom line is relatively new, problematic and often subjective. The Global Reporting Initiative (GRI) has developed guidelines to enable corporations and NGOs alike to comparably report on the social impact of a business.

"Planet" (natural capital) refers to sustainable environmental practices. A TBL company endeavors to benefit the natural order as much as possible or at the least do no harm and curtail environmental impact. A TBL endeavor reduces its ecological footprint by, among other things, carefully managing its consumption of energy and non-renewable and reducing manufacturing waste as well as rendering waste less toxic before disposing of it in a safe and legal manner. "Cradle to grave" is uppermost in the thoughts of TBL manufacturing businesses which typically conduct a life cycle assessment of products to determine what the true environmental cost is from the growth and harvesting of raw materials to manufacture to distribution to eventual disposal by the end user. A triple bottom line company does not produce harmful or destructive products such as weapons, toxic chemicals or batteries containing dangerous heavy metals for example.

Currently, the cost of disposing of non-degradable or toxic products is borne financially by governments and environmentally by the residents near the disposal site and elsewhere. In TBL thinking, an enterprise which produces and markets a product which will create a waste problem should not be given a free ride by society. It would be more equitable for the business which manufactures and sells a problematic product to bear part of the cost of its ultimate disposal.

Ecologically destructive practices, such as overfishing or other endangering depletions of resources are avoided by TBL companies. Often environmental sustainability is the more profitable course for a business in the long run. Arguments that it costs more to be environmentally sound are often specious when the course of the business is analyzed over a period of time. Generally, sustainability reporting metrics are better quantified and standardized for environmental issues than for social ones. A number of respected reporting institutes and registries exist including the Global Reporting Initiative, CERES, Institute 4 Sustainability and others.

The eco bottom line is akin to the concept of Eco-capitalism.

"Profit" is the economic value created by the organisation after deducting the cost of all inputs, including the cost of the capital tied up. It therefore differs from traditional accounting definitions of profit. In the original concept, within a sustainability framework, the "profit" aspect needs to be seen as the real economic benefit enjoyed by the host society. It is the real economic impact the organization has on its economic environment. This is often confused to be limited to the internal profit made by a company or organization (which nevertheless remains an essential starting point for the computation). Therefore, an original TBL approach cannot be interpreted as simply traditional corporate accounting profit plus social and environmental impacts unless the "profits" of other entities are included as a social benefits.

To conclude, since many business opportunities are developing in the realm of social entrepreneurialism, businesses hoping to reach this expanding market must design themselves to be financially profitable, socially beneficial and ecologically sustainable or fail to compete with those companies who do design themselves as such. For example, Fair Trade and Ethical Trade companies require ethical and sustainable practices from all of their suppliers and service providers.

Organizational Transformation

Organizational transformation can be defined as a change, which is fundamental, complex and radical. These changes go far beyond making the organization better or improving the status quo. Transformational change entails the significant shifts in corporate philosophy, values and in the numerous structures and organizational arrangements that shape the members' behaviour. It also involves reshaping the organization's culture and design elements.

Organizational transformation is particularly pertinent to changing the different features of the organization such as structures, processes, information system, human resource practices and work design. These features need to be changed together and that too in coordinated fashion so that they can mutually support each other and also the new cultural views and assumptions. It is characterized as the transition from a control based to a commitment-based organization. It could easily be distinguished from other types of strategic changes by its attention to the people side of the organization. To label it as transformational, a majority of individuals in an organization must change their behaviours.


Thus it can be concluded that the corporate today need to inculcate the best ethical practices at the same time efforts need to be directed for encouraging employees towards individual morality. Corporations today need to fulfil their social responsibility of business not only to sustain the growth and win customers confidence but also to include it at all the strategical levels of decision making. 


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Dr. Ravi Shekhar Vishal
Dr. Shardul Chaubey
Senior Lecturer
School of Management Sciences
Mohansarai-Mughalsarai Bypass, Varanasi

Source: E-mail May 14, 2010


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